Europe
European markets have continued to edge higher in the aftermath of the weekend Italian vote, with the FTSEMib outperforming, and the FTSE100 underperforming.
While there is increasing concern that the private sector bailout of beleaguered Italian lender Monte Dei Paschi may not happen investors seem blissfully untroubled, despite the fact that a failure to find a solution could well bring the Italian government into conflict with European rules on banking bailouts.
Italy’s largest bank Unicredit (MI:CRDI) has resumed its upward momentum from last week despite concerns it may have to raise an extra €13bn in extra capital in the coming weeks, though Monte dei Paschi’s share price remains under pressure.
Banks across Europe have also enjoyed a similarly positive session as investors adopt a fairly sanguine outlook to events in Italy.
The latest economic data out of Europe continues to remain positive with the final EU Q3 GDP numbers showing an upward revision to the annualised numbers, to 1.7%, while German factory orders also jumped sharply in October, up by 4.9% the biggest rise in two years with the cheaper euro powering growth in the US and emerging markets.
Though stock markets remain complacently untroubled bond markets are also showing signs of a slightly more sanguine outlook as well with Italian 2 year yields slipping back another 4 basis points to their lowest levels in over a week.
On the FTSE100 the best performer has been HSBC after the bank was upgraded by Morgan Stanley (NYSE:MS) on a better revenue outlook, while RBS (LON:RBS) shares are also building on yesterday’s gains after the bank settled with some shareholder groups over its 2008 rights issue.
The utilities sector has also performed well carrying some positive momentum from a decision in Germany to grant compensation to those affected by the German government’s decision to accelerate the shutdown of its nuclear power plants. E.On and RWE sued the German government for loss of investment income as a result of the unilateral decision.
On the downside the worst performing sector on the benchmark index has been mining stocks with Anglo American (LON:AAL) and BHP Billiton (LON:BLT) slipping back on weaker copper prices.
US
US markets continued to build on their momentum from yesterday, opening slightly higher, and once again looking towards new record highs.
On the data front the latest US trade balance for October widened out to -$42.6bn from -$36.4bn in September. A drop in exports appears to have pushed out the deficit slightly more than expected.
On the companies front auto parts retailer AutoZone posted an improvement in earnings for the latest quarter, beating estimates, while also boosting profit margins.
Boeing (NYSE:BA) shares slid sharply on the open after US President elect Donald Trump tweeted that the latest order for Air Force One replacement planes should be cancelled due to the $4bn expense.
US factory orders for October rose more than expected at 0.8%
FX
The pound continues to hold up well hitting two month highs against the US dollar as markets continue to focus on the latest economic data and pushing to one side the noise coming from the Supreme Court hearings on Article 50. Aside from that there is also a school of thought that suggests that the involvement of the courts could well hold up the entire Brexit process, and that this is being supportive of the pounds recent strength.
The euro is amongst the worst performers today despite better than expected economic data, as the US dollar rebounds after yesterday’s sharp losses.
The Australian dollar is also weaker after the Reserve Bank of Australia kept monetary policy on hold, citing concerns about a softer economy in Q3.
Commodities
Oil prices appear to be struggling after yesterday’s revelation that OPEC saw record production in November of in excess of 34m barrels a day. With African countries showing further increases in output it is becoming increasingly difficult to see how OPEC will be able to meet its new 32.5m barrel a day production ceiling given that they are well north of it already.
It would appear that this scepticism about OPEC being able to deliver on its promises is helping drive the oil price back down again after hitting one year highs earlier this week.
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